Anti-money laundering measures still ineffective

Most countries have their own counter money laundering laws. We have also Anti-money laundering Act-2002. Money laundering has been defined in the said Act as a) directly or indirectly acquired assets in an illegal way; and b) transfer, conversion and concealment of assets acquired directly or indirectly in an illegal way.

Here the main point is that a person can be guilty of the offence of laundering the proceeds of someone else's criminal conduct in almost all the countries that have counter money laundering laws.

Who are money launderers?

The criminals launder money -- is the simplistic answer to this question. But, the answer is far too simple to be completely true. The fact is that money launderers are to be found in all walks of life, many acting entirely innocently.

However, any one who helps a criminal to launder the proceeds of his crime is also a money launderer. This means bankers, lawyers, accountants, car dealers, stock exchange brokers, underwriters, insurance agents, bond sellers, property dealers, tax officials and others happen to be indirect money launderers if they allow their businesses to be used by some one to launder the proceeds of a crime. Generally, the only defence is that 'the businessman was unaware of what was happening.' But, this will often be difficult to prove.

The final class of money launderer is the person who helps to create the scheme, even if he does not actually take part in it. So, an accountant who recommends a tax evasion scheme is himself a money launderer.

History of money laundering

While the term "money laundering" was invented in the 20th century, the history of money laundering goes far back. According to verifiable historical records money laundering was prevalent even in 4000 BC. To avoid the abuse by ruler, merchants at that time used to find ways to hide their wealth. There were also efforts in moving it around without it being identified and confiscated .In addition to hiding it, the merchants would move it and invest it in businesses in remote areas or even outside the native land. In this way, the offshore industry was born -- so was tax evasion. And, so were the principles of money laundering -- to hide, move and invest wealth to which someone else has a claim.

For ages money launderers used non-currency means of holding money for convenience.

Money and value were separated and value was represented by assets. Money launderers used recognisable and convertible assets to restore the value of money, including laundered money. Gold and diamond remain favourite means of holding money till today.

Money laundering and tax

Notwithstanding the debate of intergovernmental laws regarding tax crimes, within any country, the question of whether tax crimes are a predicated offence for the purposes of money laundering is the express provision of the counter money laundering laws or the interpretation of those laws by the court. In most countries that have "all crimes" counter-money laundering laws, it is almost certain that tax crimes will fall within the catchall provisions. The principle governing the tax offences is, in fact, easy to understand. If a person who is liable to pay a 40 percent marginal rate of income tax receives Tk 100 for work and fails to declare it, then Tk 40 is money stolen from the Treasury. It is the tax evaded that is laundered.

What does money-laundering matter?

Money laundering has immense impact on the economy. Money laundering, which is in the truest sense of word a financial crime, affects every body. It results in increased taxes for those that do not evade tax, it results in increased insurance policy premiums for those that do not make fraudulent claims, it results in higher taxes for those that do not make fraudulent claims for benefits, it results in higher costs to businesses, which means a combination of less profits and higher prices to consumers. It means shopping on the internet or even at your local supermarket is more risky because the trader may be a fraud steer and it mean that money flows into the hands of the corrupt politicians and businessmen, including those engaged in trafficking in drugs, arms and people.

The present scenario

During the 90's money laundering became endemic globally. Particularly, the introduction of electronic money transfer mechanism opened a new horizon of easy money laundering .The voluminous flow of illegal money across global financial network created panic in the minds of regulators. The global quantity of laundered money crossed the border of billion in the 90's. Due to lack of awareness, on the part of our regulatory bodies, we could not understand the gravity of the situation in the 90's.During the early 2000 our enforcing agencies came to realise that money-laundering had become rampant in our financial system. The money launderers were extensively using our financial system for transfer, conversion and concealment of wealth earned directly or indirectly in an illegal way. Owing to the inherent weakness in our existing regulatory bodies flight of resources through banking channel continued unabated.

Under the circumstances a new department was opened in the central bank to stop the illegal flow of money along banking routes. In a hurried manner, the Anti Money Laundering Act-2002 was enacted in the parliament. Bangladesh bank was empowered amply by the new law to investigate into money laundering cases (Clause-4, AML-ACT) of any financial institution including banks and in framing cases (Clause 8(2),AML-ACT)against the offenders if necessary .

During its two years of existence the anti money-laundering department unearthed several money laundering related offences. These offences include false cash incentive withdrawal, hundi through ship breaking business, flight of foreign exchange through unauthorised courier business and false declaration of foreign exchange while entering it into country. But, unfortunately Bangladesh Bank was found to be reluctant in framing cases against the offenders as per law. Rather it was noted that after primary inquiry Bangladesh Bank was finishing its responsibilities by sending the files of money laundering related cases to the Bureau of Anti-corruption for further investigation. The secondary investigation is conducted by the officers of Bureau of Anti-corruption with final decision whether to file case or not.

Since its inception in 2001 the anti-money laundering department of Bangladesh Bank has sent approximately 150 cases to Bureau of Anti-corruption for subsequent actions. Later it was found that almost all the cases were either dismissed or commented on as bearing no merit for framing case in the court. The strenuous job of primary investigation and putting up cases by the central bank officers bore no fruits.

It is a question to many that how the opinion of non-professional (in banking sense) bureau officials can get priority over Central Bank's decision? According to the frustrated investigators of the central bank if this flawed system of money laundering case disposal is allowed to continue, very soon, Anti-money Laundering Act-2002 will loose its meaning in its entirety.

Another weakness which persists in our counter money laundering measures is that Bangladesh Bank's area of jurisdiction is very much limited in proportion to the vast area of the money laundering world .At present, Bangladesh Bank is investigating only the banking industry to find out the crimes committed by the money-criminals. Generally, money launderers invest their black money in paper and non-paper assets. Not to mention the non-paper assets, stock exchange, Investment Corporation of Bangladesh, Directorate of National Savings and insurance companies are the institutional routes through which money launderers move. Bangladesh Bank, though empowered by Anti-money Laundering Act-2002 to investigate into the financial affairs of any financial institution, which it deems necessary, is yet to chalk out any elaborate programme for investigating the above-mentioned institutions. In reality, Bangladesh bank jumps into action upon receipt of complain from news media and individual. Seemingly, it remains a distant dream that we may have a central database of all money laundering information in our central bank.

Central bank is the paramount organisation in the financial sector .If it fails to exercise the power it is invested with to stop illegal flow of money, it will definitely encourage the money launderers to cause havoc on our already fragile financial system. The sooner the high-ups of central bank realise this the more benefit it will accrue to the nation.

Ahmed Ali is a banker.